Trump, Taiwan, and Tech: The Political Tremors Shaking Wall Street (Weekly Cheat Sheet)

This week was a wild ride that would spin even the most seasoned trader’s head. The stock market took a hit, but don’t let that fool you – the broader market tells a different story. It’s like that old Wall Street adage: “The trend is your friend, until it bends.” And boy, did we see some bending this week.

The losses were concentrated among mega-cap stocks and growth stocks, particularly in the semiconductor sector. The Vanguard Mega-Cap Growth ETF dropped 4.0%, while the Philadelphia Semiconductor Index plummeted 8.8%. As someone who’s been in this game for over two decades, I can tell you that these kinds of sector-specific moves often signal a shift in market sentiment.

What’s behind these moves? It’s a tale of consolidation and political intrigue that would make a great Netflix series. The Biden Administration is considering tightening export restrictions to China, which rattled semiconductor stocks faster than a squirrel on espresso. Meanwhile, former President Trump’s comments about Taiwan’s semiconductor production touched a nerve in the market. It reminds us how geopolitics can send shockwaves through our portfolios.

But it wasn’t all doom and gloom. Small-cap stocks, cyclicals, and value stocks saw a boost early in the week. The Russell 2000 finished up 1.7%, despite some late-week retreats. Regional bank stocks were standout performers, with the SPDR S&P Regional Banking ETF climbing an impressive 7.5%. It’s like watching the underdogs in a sports movie – they might not always win, but they sure know how to put on a show.

Turning to Politics

As we approach election day, staying informed about political developments that may impact the markets is essential. Yesterday afternoon, President Biden surprised everyone by announcing that he would not continue his re-election campaign and instead endorsed Vice President Kamala Harris.

Meanwhile, former President Trump’s campaign appears to be gaining momentum following his recent convention appearance and assassination attempt. Some analysts suggest he could potentially secure a record number of electoral votes.

These developments may have important implications for investors. A potential Trump administration could mean continuing previous Trump tax policies, supporting independent energy initiatives, and taking a pro-market stance.

US Market Highlights

  • The market is betting on a full rate cut by September, thanks to Fed Chair Powell’s hints that they won’t wait for inflation to hit 2% before easing. It’s like watching a high-stakes poker game, and Powell just showed his hand.
  • Amazon Prime Day sales hit a record $14.2 billion, up 11% year-over-year. Looks like consumers still have some spending power! As I always say, never underestimate the American consumer’s ability to find a good deal.
  • Retail sales (excluding autos) surged in June, beating expectations. This could be a good sign for consumer confidence. It’s like watching a plant that you thought was dead suddenly sprout new leaves.
  • New housing projects hit an eight-month low. As someone who’s weathered many market cycles, I can tell you this might be a drag on Q2 economic growth. The housing market is like a canary in the coal mine for the broader economy.
  • Car repossessions are up 23% from last year. This is a concerning trend that we’ll need to keep an eye on. It’s a reminder that behind all these numbers and percentages are real people facing real financial challenges.
  • The GOP convention featured the nomination of Ohio Senator J.D. Vance for Vice President. Political events like these can have ripple effects on the market, so it’s worth keeping an eye on.

Global Highlights

  • The European Central Bank held interest rates steady after June’s cut. They’re still worried about domestic price pressures. It’s like watching a tightrope walker – one wrong move and things could get dicey.
  • China’s Q2 economic data missed expectations, with GDP growth slowing to 4.7%. As an old hand in the markets, I can tell you this has implications far beyond China’s borders. The global economy is like a spider’s web – touch one part, and the whole thing vibrates.
  • Google and Microsoft are offering Nvidia AI chips to Chinese companies through data centers outside China. It’s a clever workaround to export restrictions. In the world of international business, where there’s a will, there’s often a way.
  • Canadian inflation cooled faster than expected in June. The Bank of Canada might be eyeing a rate cut soon. It’s like watching dominoes fall – one central bank’s move can trigger a chain reaction.
  • Byju’s, once India’s most valuable startup, is facing insolvency. It’s a stark reminder that even unicorns can stumble. In the startup world, today’s darling can be tomorrow’s cautionary tale.
  • New condo sales in Toronto are down 57% in 2024, hitting the lowest level in over 27 years. However, this trend has done little to help affordability. It’s a classic case of supply and demand not always moving in lockstep.

Commodities & Crypto Corner

Oil markets are in a holding pattern, caught between concerns over Chinese demand and anticipation of US monetary easing. It’s like watching a game of economic tug-of-war. Brent crude is trading around $85.2, while WTI is at $81.20.

Industrial metals are feeling the pressure, with copper dropping nearly 3% to $9,386 per tonne. Gold, however, hit a new high of $2,483 before settling around $2,420. As I often tell my clients, gold is like that reliable friend who shows up when times get tough.

In the crypto world, Bitcoin is flirting with $65,000, up 5.5% this week. The influx of money into Bitcoin Spot ETFs in the US is driving this rally. EthereumSolana, and Binance Coin are all riding Bitcoin’s coattails. It’s like watching a high-tech gold rush.

Calendar – The Week Ahead

Next week, earnings season kicks into high gear. Keep your eyes on Alphabet and Tesla – their results will be a litmus test for the “Magnificent 7” stocks. These earnings reports are like report cards for the market’s star pupils.Other key earnings to watch:

  • Coca-Cola: Will the fizz still be there?
  • General Motors: Can they steer through supply chain issues?
  • Ford: Will their electric vehicle push pay off?

On the economic front, we’ll get the latest personal income and outlays update, including the Fed’s favorite inflation gauge – the core PCE price index. This report is like a health check-up for the economy.

Don’t forget about the three-day Bitcoin 2024 Conference, featuring an appearance by Republican presidential candidate Donald Trump. And for sports fans, the Paris Olympics kick off on Friday. While these events might seem unrelated to finance, they can have surprising effects on market sentiment.

Monday, July 22

  • No scheduled reports

Tuesday, July 23

  • 02:00 (UTC-4) – Germany GfK Consumer Confidence (-21.8 vs. forecast -21)
  • 03:30 (UTC-4) – Germany HCOB Manufacturing PMI Flash (43.5 vs. forecast 44)
  • 09:45 (UTC-4) – Canada BoC Interest Rate Decision (4.75% vs. prior 4.5%)
  • 09:45 (UTC-4) – Canada BoC Monetary Policy Report

Wednesday, July 24

  • 04:00 (UTC-4) – Germany Ifo Business Climate (88.6 vs. forecast 89)

Thursday, July 25

  • 08:30 (UTC-4) – USA Durable Goods Orders MoM (0.4% vs. forecast 0.1%)
  • 08:30 (UTC-4) – USA GDP Growth Rate QoQ Adv (1.9% vs. forecast 1.4%)

Friday, July 26

  • 08:30 (UTC-4) – USA Core PCE Price Index MoM (0.1% vs. forecast 0.1%)
  • 08:30 (UTC-4) – USA Personal Income MoM (0.4% vs. forecast 0.5%)
  • 08:30 (UTC-4) – USA Personal Spending MoM (0.3% vs. forecast 0.2%)
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